Private Information, Capital Flows, and Exchange Rates

By Jacob Gyntelberg, Subhanij Tientip, Mico Loretan

August 1, 2012

Preview Citation

Format: Chicago

Jacob Gyntelberg, Subhanij Tientip, and Mico Loretan. Private Information, Capital Flows, and Exchange Rates, (USA: International Monetary Fund, 2012) accessed December 22, 2024

Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary

We demonstrate empirically that not all capital flows influence exchange rates equally: Capital flows induced by foreign investors’ stock market transactions have both an economically significant and a permanent impact on exchange rates, whereas capital flows induced by foreign investors’ transactions in government bond markets do not. We relate these differences in the price impact of capital flows to differences in the amounts of private information conveyed by these flows. Our empirical findings are based on novel, daily-frequency datasets on prices and quantities of all transactions of foreign investors in the stock, bond, and onshore FX markets of Thailand.

Subject: Currency markets, Exchange rates, Financial markets, Foreign exchange, Securities markets, Stock markets

Keywords: Bond order flow, Bond order flow series, Citibank customer order flow, Component FX order flow, Currency markets, Customer order flow, Exchange rate fluctuation, Exchange rate models, Exchange rates, Flow series, FX dealer, FX order flow, FX order flow regression, FX order flow shock, FX risk, FX swap order flow, FX transaction, Global, Market microstructure, Order flow, Private information, Responses to FX order flow shock, Securities markets, Stock markets, Swap transaction, Thai baht, WP

Publication Details

Pages:

28
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2012/213
Stock No:

WPIEA2012213
ISBN:

9781475505634
ISSN:

1018-5941

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